JetBlue Sees Wider Airline Ties With New York City Base

By Mary Schlangenstein -
Jan 30, 2013

JetBlue Airways Corp. (JBLU), whose
dominance at New York’s Kennedy airport has helped it thrive
without a global airline alliance, plans to share flight-booking
codes with major carriers for the first time.

So-called two-way code shares, in which carriers book
passengers on each other’s flights and share revenue, may start
as soon as this year, Chief Executive Officer Dave Barger said
in an interview yesterday. The New York-based carrier isn’t
planning to join an alliance such as Star, SkyTeam or Oneworld.

JetBlue is the largest domestic airline at John F. Kennedy
International Airport, and more than half its flights originate
there. Code-sharing accords would let the company team with
larger U.S. airlines and some of the more than 60 international
carriers using Kennedy as a base for overseas flights.

“The value of JFK has never been utilized successfully by
any other airline,” Barger said. “This is a terrific gateway
and we’re sitting there as the largest domestic airline. It’s
very valuable for us and for our partner airlines.”

Code shares most often are used by airlines within the same
global alliance, allowing them to share ticket revenue without
each assuming the full cost of operating a flight. Alliances
also let members jointly market flights and reduce spending by
sharing some airport, maintenance or operating facilities.

‘Unknown Territory’

The carrier has 22 so-called interline agreements, which
allow each airline to sell tickets on specific partner flights
and check bags on a full itinerary, with revenue split on a pro-
rated basis. Most of JetBlue’s interline partners are based
outside the U.S.

JetBlue’s decision in 2010 to use Sabre Holdings Corp. for
its reservation and customer service systems gave it the
technology to consider two-way code shares, Barger said. Its
only prior two-way agreement, with regional carrier Cape Air,
expired in 2011.

“We are charting unknown territory,” Barger said. “It’s
likely that two-way code share will be part of our landscape as
we move into 2013 and 2014.”

New revenue would be a boost for the sixth-largest U.S.
airline, whose fourth-quarter sales of $1.19 billion trailed
analysts’ estimates after superstorm Sandy forced flight
cancellations and reduced travel demand.

Rating Cut

JetBlue was downgraded today to underperform from market
perform by Savanthi Syth, a Raymond James Financial Inc. analyst
who cited the carrier’s “relatively high costs.” The shares
fell 4.4 percent to $5.80 at the close in New York. They have
declined 2 percent in the 12 months ended today.

JetBlue hasn’t decided how it would split revenue with
code-share partners and wants to get feedback from employees on
such plans as it moves ahead, Barger said.

“We don’t want to be negatively impacted by flying the
short route to someone flying 7,000 miles,” Barger said. “It
has to be worth it for us if we’re flying someone 299 air miles
from Buffalo.”

In addition to interline accords, JetBlue also has one-way
code shares with six carriers, in which the international
partner puts its airline designation on certain JetBlue flights
and markets the segments as their own. Specific terms are
negotiated with each partner, with JetBlue receiving rates close
to the local fares in each revenue class.